Home Buying in 91770>Question Details

Irene, Home Buyer in Los Angeles, CA

Appraisal value came in 24K lower than the approved short sale price, what should we do now? do short sale lenders usually renegotiate the deal?

Asked by Irene, Los Angeles, CA Fri May 7, 2010

Since there are no comps in the neighborhood in the last 3 months, the appraiser used one of the recently closed REO price to appraise ours.

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Answers

5
Irene:

The appraisal coming in below the approved sales price happens quite often these days, as Short Sale lenders are taking a very long time to approve transactions.

What to do? Write an amendment to the purchase contract indicating how much you are willing to pay for the house, and attach the appraisal. Have the listing agent present this information to the short sale lender. The reality is, if it is not worth the approved price, the short sale lender will NOT get more for the home in a foreclosure than what you are willing to pay.

Do short sale lenders negotiate the deal? Some do, some don't. It is mostly dependent on how the listing agent presents the fact to the short sale lender. It is, however, also dependent on how the short sale lender presents the facts to the underlying investors on the seller's loan.

The reality is you have several choices:
1. Get another appraisal.
2. Try to negotiate the price down to the appraised value.
3. Come up with cash to close the gap between the appraised value and the sales price (not a great idea unless you really really really love the home).
4. Walk away.

My suggestoin is do Number 2. I have been succcessful on negotiating lower sales prices on several short sales that I listed, and I only had to present the short sale lender with a copy of the appraisal on about half of them. However, giving the copy to the lender up front makes your case much stronger. Hope this helps. Dare to Dream.

Shel-lee Davis, CDPE, SFR, QSC
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
1 vote Thank Flag Link Fri May 7, 2010
The short sale lenders are usually pretty receptive to an actual appraisal, however, I would look at also re-examining the appraisal if the short sale lender balks, especially if you feel strongly that the appraised value is lower than it should be. I have challenged appraisals successfully several times this year - the changes to our appraisal system has created some serious problems with documenting true market value. Fair market value should be, by definition, the price point where a willing seller will sell, and a willing buyer will buy, neither under any extraordinary pressure. When a home sells in a multiple offer situation, and there are dozens of offers in hand to demonstrate value, yet the appraisal comes in low, one must ask, ...."Huh?" : )

Have your agent pull other comparables that would better demonstrate the value - making sure that they are within a one mile radius, even if they aren't in the same development, and the newer, fresher, the better, and ask the bank to have the appraiser reconsider or correct any errors found. Sometimes you'll get at least some more value. On a recent sale, we were sure the appraisal was too low - the short sale lender agreed to come up part way between the appraisal and the contract price, but wanted someone to bridge the gap. The appraisal reconsideration gave us what we needed to work with, and we were able to keep the transaction together.
0 votes Thank Flag Link Fri May 7, 2010
Thank you all for the great advice.

Yes, we submitted in an addendum today with lower price (a bit higher than the appraised value) to the lien holders. Waiting for them to response. we have a really really tight deadline to close by 5/15.

Keeping our fingers acrossed..
0 votes Thank Flag Link Fri May 7, 2010
do you mind me asking....what happen i'm alos in a similar situation and would love to hear what happend
Flag Thu Aug 23, 2012
Hello Irene,

Yes, they do negotiate. Make sure you are working with a knowledgable Realtor whos knows about short sales. The process may take longer but you can try to negotiate for sure. No harm in trying. Good luck.

Kamal Randhawa
Broker
510-932-1066
0 votes Thank Flag Link Fri May 7, 2010
Negotiation is always there before closing, and there are things you can do to renegotiate for the price throught the LISTING agent, and throught him/her to reach the lien holder. Try to show them the appraisal report and mention them the report is base on the REO not short sale, since short sale is always come lower than REO around 10-20% in the area already. However, you have to keep in mind that short sales take WORKS and TIME, so the listing side may reject you inquires, and the lien holder may also reject to lower their approval price since they are already losing in this deal. But give them a shot and work with your agent to make that happen.

Thanks you!

Kiet Truong (Robert)
IRN Realty
556 Las Tunas Dr 101
Arcadia CA 91007
Tel: 626-623-2183
Fax:626-447-9521
0 votes Thank Flag Link Fri May 7, 2010
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